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Budget 2020: What it is and Why is it Important to the Housing Market?

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The Budget is a major political and economic event – it’s when the government set outs its proposals for the next 12 months.

Similarly to a company explaining its sales and revenue, the government will talk about spending (on infrastructure and welfare, for example) and income (from taxes, including those on homes). The ‘mood music’ created by a budget influences the public, for example, more people move house when an economy is strong.

This year’s Budget on March 11 is significant because it is the first from the new government led by Prime Minister, Boris Johnson.

Will Stamp Duty be Reformed?

One major change might involve stamp duty, which is the tax paid by buyers of properties above a certain price.

Last year there was some discussion, including by Boris Johnson before he became Prime Minister, that stamp duty could be shifted from property buyers to property sellers; if this is to happen, it would be announced in the Budget. This would reduce the amount of money a purchaser would have to find at the outset – but it might, indirectly, lead to house prices rising as sellers would want to cover the cost of the stamp duty they were having to pay.

Many economic and political analysts believe the government is unlikely to agree to such a significant change, but there may be less dramatic changes involving stamp duty.

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A Possible Stamp Duty Surcharge

First, it’s likely that a stamp duty surcharge will be imposed on foreign buyers of homes in the UK – so long as the buyers are not themselves living in the UK. This has already been hinted at by the government and would be seen as a way of deterring overseas investors from buying homes which could, in theory, be purchased by local people.

More Good News for First-Time Buyers?

Secondly, it’s considered likely that the current temporary exemption of stamp duty for many first time buyers could be extended for a longer period or made permanent. At the moment, FTBs do not pay any stamp duty on homes costing up to £300,000 and reduced amounts on properties costing above that figure. It has led to a significant rise in the number of first-time buyers and an extension of the proposal would probably be very popular.

Helping Other Parts of the Housing Market

Thirdly, stamp duty could be used to incentivise other parts of the market – for example, a reduction might encourage older owners to downsize to smaller properties, thus releasing larger properties to allow more choice of homes for younger purchasers in the market.

What Other Housing Measures Might be Introduced?

Any new measures to help renters are likely to be announced in the Budget. For example, in 2016 the government used that year’s Budget to reveal its plan to ban most letting agents’ fees for tenants in England and Wales – although it took until 2019 to become law.

‘Lifetime Deposits’ Likely to be Confirmed

This year there is an expectation that there may be details revealed about ‘lifetime deposits’ – a way of avoiding tenants having to find large sums of money to use as a down payment when they move from one rental property to another. The government wants a more flexible system of deposits, requiring smaller sums to be found by tenants; this could encourage more people to move around within the private rental sector.

Affordable Home and Shared Ownership Programmes

The Budget may also be the opportunity for a relaunch of the Affordable Homes Programme; the government has let it be known that it wants “hundreds of thousands of new homes for a range of people in different places.” Allied to this there are expected to plan for a reformed Shared Ownership scheme, allowing buyers to purchase “chunks” of a property and pay rent on the rest: a person may start buying 10 per cent, then extending that to 15 or 20 per cent as they can afford to do so. Eventually, they get full ownership.

What Else Happens in the Budget?

Although technically the Budget is a once-a-year financial statement, it is often used as a political rallying cry; this year, because of a new government and Brexit trade talks underway, there is a widespread belief that there will be upbeat announcements about long-term infrastructure plans, including the future of the controversial High Speed 2 rail service and other proposals.

The speech is usually between 60 and 90 minutes long, so announcements can come thick and fast, and there are traditional some surprises too – popular causes that are championed by the government to receive favourable tax treatment. By the end of the speech, we all know the targets for the new government and how they affect the homeowner, buyer, tenant and landlord. 

Last Updated: March 6th, 2020